CHAPTER 2-ECONOMIC DEVELOPEMENTS 1952-64

Question 1

How was the British economy like in 1951-64?

Surface level assessment

Answer 1

• The economy was growing quickly as it recovered from WII.

(1951-64) = age of affluence (POST WAR BOOM)

• People felt richer as wages increased.
• Food rationing ended (1954)
• World wide recovery = led to inc in global trade
• Productivity increased
• Rab Butler (Conservative Chancellor) was able increase Conservative election prospects with a giveaway budget that provided the middle class with 134 million in tax cuts)

(Full employment (1955:less than 1% of workforce unemployed) + tax cuts =
enabled ppl to buy more consumer goods —) encouraging more investment and growth)

=======================================RISE IN LIVING STANDARDS ENCOURAGED GROWTH IN BIRTH RATES.

Question 2

On the surface the British economy and people were in a period of affluence, however how did things look below the surface?

Answer 2

• there was a lot of underlying economic problems.
  5) main problems:
  1) Weak economic growth (economic production low incomparison to other countries)

2) balance of payments issues + run on the pound
3) Stop go economics

4) Suez crisis (1956)
5) Economic instability caused by stop to policies

Question 3

What was the problem with economic growth/production?

Answer 3

-economic growth was not as strong as other European countries.

West Germany - 1952- 126

West Germany - 1959- 225

Netherlands - 1952- 103

Netherlands - 1959 - 158

uk - 1952 - 101
1959- 129

Question 4

What were the problems with the balance of payments?

Answer 4

Consistent danger =

inc consumer demand would lead Britain to import more than it exported

This would lead to a BOPs problem and cause a run on the pound.

The uk balance of trade
1951-55 (overall trade balance : -56)

1956- 60 (overall trade balance : +132)

Question 5

What was the problem with the stop and go economics?

Answer 5

Risk of economy growing faster = increase in productivity

This would lead to inflation as demand OUTSTRIPPED supply

To counter this the Conservative Government followed what was called (stop go economics)

1. Economy slows
2. Government encourages growth by lowering interest rates + allowing wages to rise
3. When economy starts to over heat + inflation goes up
4. Government slowed economy down by raising interest rates + controlling wage increases

Question 6

What was did the Suez crisis (1956) reveal?

Answer 6

The underlying weakness of the British economy + the problems of the stop and go policies.

• Some in the CP (Thorneycroft) (Enoch Powell) argued that rather than managing the economy by managing demand.

The gov should control moment supply this was a form of monetarism.

To do this gov would need to limit gov spending which would mean cuts to house building/welfare and public services.

This was likely to be unpopular with the export rate so Macmillan didn’t support this.

Seemed like a Good decision as the British economy recovered quickly after the Suez crisis (1956).

Sterling recovered against the US dollar and the hiv were able to make big tax cuts (1959) helping ensure election success and yeh economy grew at its fastest rate 1960-64.

Question 7

Even after the recovery from the suez crisis how did it become harder to keep the economy stable with stop go policies.

Answer 7

(1961) :
1) Gov need to apply to the IMF (international Monetary Fund) for a LOAN and was forced to introduce PAY PAUSE to keep inflation low.

2) Gov made an application to join the EEC
3) NEDC NATIONAL ECONOMIC DEVELOPMENT COUNCIL was set up to plan economic growth.

(1962)
NIC- National income commission was established to manage wages and prices

(1963)

1) British application to join EEC rejected
2) public expenditure cut (branch lines and stations were closed in response to the Beeching reports recommendations.

(1964)
1) at the time of the general election in 1964 there was a deficit of 800 million.